Working papers

Abstract

Recent discussions on the definition of growth in terms of welfare beyond GDP suggest that it is of urgent need to develop new approaches for measuring the economic performance of the firms and national economies. The new concepts should take into account simultaneously economic as well as social and environmental goals. We first discuss several approaches to productivity measures. Then we extend the Data Envelopment Analysis models for environment to measure the so called eco-efficiency and for social indicators to take into account the social performance. For an illustration, we perform the analysis of 30 European countries in the year 2010. In the last section we discuss the possibilities of inter-temporal analysis of proposed models and of their use in ex-ante evaluation of different policy scenarios.

Abstract

Neoclassical growth accounting is a methodology used to measure the contribution of different production factors to economic growth and to indirectly compute the rate of technological progress. This model assumes constant returns to scale and perfectly competitive factor markets, which implies that factor prices are equal to marginal products – something that is only satisfied if factor markets are cleared, and external effects and distortions are absent. However, these conditions are usually not satisfied in real economies. Moreover, growth accounting assumes efficiency on factor and commodity markets, and consequently does not distinguish between efficiency change and technical change. In this paper, we estimate total factor productivity growth without recourse to data on factor input shares or prices. In the proposed model, the economy is represented by the Leontief input-output model, which is extended by the constraints of primary inputs. A Luenberger productivity indicator is proposed to estimate productivity change over time; this is then decomposed in a way that enables us to examine the contributions of individual production factors and individual outputs to productivity change. The results allow the inference of which inputs or outputs of an economy are the drivers of the overall productivity change– this is then decomposed into efficiency change and technical change components. Using input-output tables of the US economy for the period 1977 to 2006, we show that technical progress is the main source of productivity change. Technical progress, in turn, is mostly driven by capital whereas low-skilled labor contributes negatively.